U.S. gun sales rise ahead of election

CorrieDriebusch

Firearm sales are increasing at a rapid pace in the U.S., and there appears to be more at play than the question of whether a re-election of President Barack Obama would lead to further restrictions on gun ownership.

The number of guns sold in the U.S. received a similar bounce after the presidential election in 2008, before falling off the following year. This time around, though, growing social acceptance of guns and demographic and geographic changes in buying patterns suggest the increase in firearm sales may hold.

P. James Debney, chief executive of gun maker Smith & Wesson Holding Corp.
SWHC, +0.93%
admitted earlier this year that the election was a factor in the rise of gun sales but said this time was different. "I think there's a much stronger installed user base now out there in terms of the consumer," he said.

Gun sales, as measured by Federal Bureau of Investigation background checks, rose about 21% in May from the year prior, according to data released last week. Year to date, total background checks are up about 20%.

The number of National Instant Criminal Background Checks conducted by the FBI are the best available proxy for total firearm sales, as federally licensed U.S. firearms dealers are required by law to conduct a background check on prospective buyers.

Smith & Wesson and rival gun maker Sturm Ruger & Co.
RGR, -0.22%
are benefitting from this rush to arms. In the first quarter, Sturm Ruger recorded its highest net income in at least the last four years. In March Smith & Wesson reported one of its highest quarterly profits in the past two years on strong sales of handguns, sporting rifles and concealed carry pistols.

Representatives for both companies did not return requests for comment for this article, but both are expected to continue to report growing profits. In late May, Smith & Wesson said it anticipates net sales to be up 28% year-over-year and that its firearm order backlog has more than doubled both year-over-year and from the prior quarter.

In March, Sturm Ruger said it had received so many orders for guns--more than 1 million--that it actually had to temporarily stop taking new orders due to its heavy backlog. Production and shipments in the first quarter of 2012 rose more than 50% from the year earlier, the company said. Late last month Sturm Ruger said it has resumed accepting new gun orders.

Following the 2008 election, gun sales also jumped, spurred by worries that the new administration would try to pass firearms regulation. But no new regulation was proposed, and firearms sales stalled in 2010.

The price for Smith & Wesson and Sturm Ruger stocks followed a similar pattern. In the six months following the 2008 presidential election, Smith & Wesson's stock tripled and Sturm Ruger shares jumped more than 80%. During the same period the broader market declined 5.7%.

In the past month, shares of Smith & Wesson and Sturm Ruger have fallen, weighed down by a declining broader market and some worries that these giant sales may only be short-term. Smith & Wesson shares, though, have more than doubled in the past year, while Sturm Ruger shares are up 84%.

"If Obama is not re-elected, I would expect gun sales to cool," said Jim Barrett, analyst at CL King & Associates. "Having said that, the gun population has dramatically increased and I would expect a certain portion of the new owners are getting into it as a sport or a hobby, regardless of the presidential election."

Industry data suggest a change in social acceptance of guns and an increase in female ownership is also driving an uptick in sales--and that this could lead to sustained gun sale growth post-election, analysts say.

Social views toward firearm ownership have been changing, particularly in parts of the country traditionally viewed as more wary of gun ownership, such as the Northeast. The Benchmark Company noted that the growth in background checks in the Northeast has nearly tripled over the past three years and now exceeds growth rates across the country and in the South.

Overall acceptance of gun ownership also appears much higher. According to a 2011 Gallup poll, nearly three-quarters of respondents opposed a law banning handgun possession by civilians, up from 59% in 1999.

Mr. Debney measures the shift in social views by a different metric: the proliferation of television shows about guns.

"There're many more TV shows," the Smith & Wesson CEO said in March. "There's Top Guns, Sons of Guns; you name it, they're on."

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